Time Is Money: On or Off the Clock?

Vol. 57
No. 12

Many managers still don’t understand the Fair Labor Standards Act.

By Jonathan Segal
12/1/2012

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Virtually every week I hear about another employer allegedly requiring, encouraging or tolerating situations in which nonexempt employees are working off the clock. Even large employers with robust compliance programs are not immune to such legal missteps.

Of course, it is not just larger employers being sued. Employers with relatively few workers—that literally cannot afford the cost of defense—are being sued, too.

The goal for employers is not to win "off-the-clock" cases but to avoid them.

Consider these suggestions for minimizing your exposure to such claims and maximizing your chances of winning if such a claim is brought.

Basic Principles

Some strategies for avoiding off-the-clock cases should take employers back to the basics, including training and retraining, enforcing policies that prohibit off-the-clock work, and encouraging managers to report suspected off-the-clock work to HR.

Train and retrain. Provide supervisors with training that makes clear they cannot require, encourage or even suggest that nonexempt employees work off the clock.

The most important message to convey is that supervisors cannot direct someone to work off the clock, explicitly or implicitly. Also, include guidance on how to address restrictions on overtime.

The untutored have said, "We cannot pay for any overtime." Some employees have heard "work it but don't record it."

Where overtime is not permitted, make clear that "No one is permitted to work any overtime" as opposed to saying, "We cannot afford any overtime."

Let supervisors know that if they break the foregoing rule, they will be subject to discipline up to and including discharge.

Carry a big stick. Let supervisors know that if they require, encourage or even suggest that an employee work off the clock, they will be subject to discipline up to and including discharge. This prohibition will help prove that deviations were those of a rogue supervisor and not part of an established corporate culture.

Make clear that among the most serious violations would be altering an employee's time to reduce the amount owed to him or her to stay within budget. Almost always, such "wage theft" should result in immediate discharge.

Don't go it alone. Train supervisors to report incidences to HR if they know, or have reason to know, that an employee may have worked off the clock, even if the employee has not said anything.

In harassment cases, it is not enough to avoid objectionable conduct. If employers have actual or constructive knowledge of it and ignore it, they are condoning it. Doing nothing is not a defense; it is an admission.

The same principle has been adopted in the wage and hour context. Even if employers don't require, encourage or suggest that an employee work off the clock, employers cannot allow it if they have reason to believe it may have occurred.

Supervisors need training on the obligation to report to HR potential off-the-clock work so that HR professionals can talk with the employee and determine whether and what is owed to him or her. If there is a pattern of working extra hours without permission, this may be cause for discipline of the employee, but the employee almost always should be paid.

Clear Policies

Don't leave employees guessing about the organization's policy on off-the-clock work. Spell out the employer's policy on payment for time worked, but make it clear that off-the-clock work is not permitted and that there may be disciplinary action for it. That said, set up a process encouraging employees to report off-the-clock work to HR without fear of retaliation.

Pay up. Develop a procedure HR professionals can use when they speak with employees who report off-the-clock work.

Use the procedure to determine if they are telling the truth, and then make sure they are properly paid.

If a supervisor reports that an employee has or may have worked off the clock, an HR professional should contact the employee. HR needs to determine whether the employee performed any off-the-clock work and how much time is involved. An appropriate adjustment must be made.

Sometimes, HR professionals make the mistake of assuming that no money is owed as long as the employee does not go over 40 hours in a workweek or eight hours in a day in California. Payment may be owed for off-the-clock work, even if the employee does not become eligible for overtime.

For example, assume that an employee is paid a salary for working 35 hours for a workweek. If the employee works additional hours but is short of 40, the employee generally must be paid for the "gap time."

Be specific. Develop a policy that prohibits off-the-clock work. Leave no doubt that employees must record all time worked.

Make clear that you will not tolerate any off-the-clock work.

Make clear that you will not tolerate any off-the-clock work and that all work must be on the clock.

A general rule is not enough. Spell it out. For example:

An employee may not do any work before clocking in, and, if he or she does, management must be contacted to override the start time so that he or she will be paid for all time worked.

An employee may not do any work after clocking out, and, if he or she does, management must be contacted to override the stop time so that he or she will be paid for all time worked.

Have an open-door policy. Develop a complaint procedure with appropriate assurances of nonretaliation so that employees can report concerns without fear of retribution.

There must be a strong policy and a robust complaint procedure. Contacting their supervisors should not be employees' only option. After all, supervisors often are the perceived perpetrators.

At a minimum, employees should be given the option of speaking with HR as an alternative. Employers may want to go one step further and provide another option outside of HR, just in case the problem employee works for HR.

Of course, the policy should prohibit retaliation, which should be defined broadly. If employees don't feel comfortable raising their concern in-house, they could consult with a plaintiffs' lawyer and you could end up in court.

Automated Backup

Technology can be HR's friend or foe in preventing off-the-clock work. On the one hand, time-keeping systems may be adjusted to provide HR with notifications about interrupted meal breaks or other off-the-clock work.

Tweak time-keeping system. Determine whether questions should be included in your time-keeping system that ask employees if they have done work off the clock, so that you can follow up with the employees, capture any time worked but not recorded, and then pay them for it.

Most employees are honest, but some are not. How do you protect yourself against those who may claim later that they worked hours off the clock but then bring bad-faith claims?

Most modern time-keeping vehicles include the potential for questions at the beginning or end of each shift. The answers may be helpful in ensuring that employees are paid in real time, as they should be, and in defending against false claims.

For example, at the beginning of every shift, employees can be asked before they clock in if they have done any work since they clocked out on their last shift. If they answer yes, HR should receive notification and speak with the employees.

Similarly, at the end of the day, ask a question about the employee's meal break, such as "Did you enjoy an uninterrupted meal break of 30 consecutive minutes?" If the answer is no, either HR would be contacted to determine if payment is owed or the unpaid meal break would be automatically converted to paid time.

If an employee who responds affirmatively to the meal break query later claims that he or she was interrupted almost every day but not paid, any subsequent allegations are inconsistent with his or her prior answers, sometimes referred to as attestations. This should weigh heavily against an employee's credibility.

Limit telework. Establish clear rules about whether and when employees may work remotely, such as checking e-mail, and how to ensure that time is properly documented and paid.

Sometimes it is your hardest-working employees who can cause trouble in this area because they log in at all hours and perform work. While their intentions are likely noble, you could pay a handsome price for such dedication.

Set boundaries for remote work, even for stellar employees. For example, you could block remote access to your network by nonexempt employees. Or, you could allow access only if approved and provide guidance on how to record the time to ensure proper payment.

A similar issue arises with personal digital assistants. The safest policy legally is to deny your nonexempt employees smartphones, BlackBerry devices and the like. But is that smart from a business perspective?

There may be times when nonexempt employees need these devices, so set limits as to when they can use the devices and pay them appropriately.

For example, you might set a specific block of time outside of working hours when a marketing employee away on business can use his or her BlackBerry. If you allow such periodic use, under the continuous day rule your duty to pay could be continuous, too.

Even if you have not developed specific policies yet, if you have reason to know an employee may have done work remotely, you must speak with the employee and pay him or her accordingly.

To illustrate this point: A client forwarded me an e-mail from her assistant regarding information that we needed to respond to a U.S. Equal Employment Opportunity Commission charge. The message was "Good news. See below."

My response: "Not really. See when your nonexempt assistant sent it to you!"

The author, a partner with Duane Morris in Philadelphia and managing principal of the Duane Morris Institute, focuses on counseling, training and strategic planning to minimize litigation and unionization.

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